Indemnification Clause Disputes in California Business Contracts

Last updated: November 2026

An indemnification clause shifts the cost of a claim from one contracting party to the other. In California the clause is read as written, and unless it says otherwise the indemnitor must defend the indemnitee as soon as a covered claim is tendered, before anyone decides who was at fault. Kolmogorov Law, P.C. litigates indemnity and duty-to-defend disputes for businesses in Orange County, Los Angeles, and across California, on both the demanding side and the resisting side.

Call (909) 235-6116 or contact us online to discuss an indemnity demand your business has sent or received.

What an indemnification clause does

The Civil Code defines indemnity as a contract by which one person agrees to save another from the legal consequences of someone's conduct. (Civ. Code, § 2772.) A vendor agrees to cover the customer if the vendor's product injures someone. A subcontractor agrees to cover the general contractor for claims arising from the sub's work. A buyer of a business agrees to cover the seller for liabilities the buyer assumed.

Most clauses have three parts: a promise to indemnify (pay the loss), a promise to defend (hire and pay the lawyers), and a promise to hold harmless. Drafters often run the three together. Courts do not.

How the duty to defend differs from the duty to indemnify

This is the point that surprises the most clients.

California supplies default rules for reading an indemnity contract that apply unless the contract shows a contrary intention. One of them says the indemnitor, on request, must defend actions brought against the indemnitee on matters embraced by the indemnity. (Civ. Code, § 2778, subd. 4.) The California Supreme Court has held that this duty arises immediately upon a proper tender, before the underlying case decides whether indemnity is owed at all. It covers claims which, at the time of tender, allege facts that would give rise to a duty to indemnify. (Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 557-558.)

So a subcontractor who signed a standard indemnity can owe a defense from day one even if a jury later finds the sub did nothing wrong. The duty to indemnify, by contrast, usually waits for the outcome. The two duties are separate, and a party that ignores a tender can end up paying defense costs it could have controlled.

Three ways these disputes reach my desk

The first is the tendered defense that goes unanswered. A general contractor is sued over a construction defect, tenders to four subcontractors, and two of them never respond.

The second is the scope fight. A software reseller is sued by a customer over data loss and tenders to the developer under a clause covering claims "arising out of" the software. The developer says the loss arose out of the reseller's own installation work, not the code.

The third is the post-closing dispute in a business sale, where the buyer sends an indemnity notice on the last day of the claims period and the seller says it was too vague to count.

If the indemnitor neglects to defend after a request, a recovery against the indemnitee that was suffered in good faith is conclusive against the indemnitor. (Civ. Code, § 2778, subd. 5.) That rule turns a passive indemnitor into a guarantor of whatever judgment or settlement follows.

Limits on indemnity in California

In construction contracts, a clause that purports to indemnify the promisee against liability arising from the promisee's sole negligence or willful misconduct is void as against public policy. (Civ. Code, § 2782, subd. (a).) Residential construction and public works carry additional restrictions, and the rules changed for contracts signed after January 1, 2013, so the date of the contract matters. Our construction disputes page covers that layer.

Outside construction, courts enforce indemnity clauses as written, but they read them strictly. A clause that does not clearly cover the indemnitee's own negligence will usually not be stretched to do so.

Indemnity also does not run to strangers. A party outside the contract generally cannot invoke the clause unless it qualifies as a third-party beneficiary.

Tender, notice, and what happens when the indemnitor says no

A tender should be in writing, should attach the complaint, and should cite the clause. Vague emails saying "you need to handle this" invite argument later about whether a request was ever made. The indemnitee keeps the right to conduct its own defense if it chooses. (Civ. Code, § 2778, subd. 4.)

When the indemnitor refuses, the indemnitee can sue for breach of the indemnity agreement, bring a cross-complaint in the underlying case, or settle and then pursue reimbursement. A party that settles without the indemnitor's participation must usually show the settlement was reasonable and made in good faith. Our guide to cross-complaints explains the route most often used.

If the contract has an attorney fee clause, the prevailing party on the indemnity claim can also recover fees under Civil Code section 1717.

What we do

We read the clause, the complaint, and the tender letter, in that order, and tell you whether the duty to defend has been triggered. For indemnitees, we prepare a tender that is hard to ignore and, if it is ignored, pursue the indemnitor by cross-complaint or separate action. For indemnitors, we assess whether the claim is embraced by the indemnity at all and whether accepting the defense under a reservation of rights is the cheaper path.

Many of these disputes resolve once both sides understand that an unanswered tender is a losing position.

Where indemnity cases are heard

Indemnity claims between California businesses are usually filed in the Superior Court: in Orange County, most often the Central Justice Center in Santa Ana; in Los Angeles, the Stanley Mosk Courthouse. Cases with a federal question or complete diversity may proceed in the Central District of California, which sits in Santa Ana and Los Angeles.

What to bring to the first meeting

Bring the full contract with every exhibit and amendment, and the complaint or demand that triggered the indemnity issue. Add every tender letter and every response, the insurance policies and certificates, a short timeline of what each side knew and when, and any defense invoices already paid.

Frequently asked questions

What is an indemnification clause in a contract?

It is a promise by one party to cover losses the other party suffers from specified claims, usually claims brought by third parties. Most clauses also include a duty to defend and a hold harmless promise. California reads the clause according to its words, with statutory default rules filling the gaps. (Civ. Code, § 2778.)

When does the duty to defend start under a contract in California?

Unless the contract says otherwise, the duty to defend starts when the indemnitee tenders a claim that alleges facts which would give rise to indemnity. It does not wait for a finding of fault. (Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 558.) An indemnitor that waits for the verdict has usually already breached.

Can an indemnity clause cover my own negligence?

Sometimes. Outside construction, California generally enforces a clause that clearly and expressly covers the indemnitee's own negligence. In construction contracts, a clause covering the promisee's sole negligence or willful misconduct is void. (Civ. Code, § 2782, subd. (a).) Clauses that are silent on the point are read narrowly.

What happens if the indemnitor ignores my tender?

If the indemnitor neglects to defend after a request, a judgment or settlement the indemnitee suffers in good faith is conclusive against the indemnitor. (Civ. Code, § 2778, subd. 5.) The indemnitee can then recover its defense costs and the loss itself, usually by cross-complaint or a separate breach of contract action.

How long do I have to sue on an indemnity clause?

Claims on a written contract generally carry a four-year limitations period. (Code Civ. Proc., § 337, subd. (a).) When the clock starts can be complicated, since indemnity claims often accrue when the loss is paid rather than when the underlying claim was made.

Talk to a California breach of contract attorney

If your business is facing an indemnity demand, or has sent one that is being ignored, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the indemnity language, the facts of the underlying claim, and the court.